Mark Cuban Won't Back Down

The Billionaire Entrepreneur on His Battles With the SEC, the Success of the Dallas Mavericks and the Lessons of 'Shark Tank'

By

Alexandra Wolfe

Dec. 27, 2013 8:19 p.m. ET

ENLARGE

Mark Cuban
Justin Clemons for The Wall Street Journal

As the owner of the Dallas Mavericks, billionaire entrepreneur Mark Cuban relishes victory, so much so that he often stands during basketball games and screams. But it is an off-court win—against the U.S. Securities and Exchange Commission—that has him fired up now, and he isn't backing down any time soon.

Today, he is sitting back on a plush leather couch in a long-sleeved T-shirt, jeans and sneakers, with his feet up on the table in a room known as "the bunker" in the American Airlines Center in Dallas. The room, down the corridor from his office suite, lives up to its name. Inside is a kitchen, bathroom and shower, as well as a wall covered in flat-panel televisions broadcasting Mr. Cuban's high-definition AXS TV network, among others.

These days, most of his energy goes into AXS TV and the Mavericks, but they represent only a part of his business efforts. His latest idea stems from his recent experience with the SEC, which sued Mr. Cuban, alleging that he had traded on material, nonpublic information when he sold his investment in the Internet search company
Mamma.com
in June 2004, before the company announced a private offering of shares that caused a drop in its stock price. The SEC alleged that Mr. Cuban agreed to keep confidential and not trade on information about the offering that Mamma.com's former chief executive told him during a phone conversation, but Mr. Cuban denied agreeing to either.

Mr. Cuban could have settled for a few million, a small part of his estimated $2.5 billion fortune, but he chose to fight instead. Ultimately, the jury sided with him. It was a tough case for the SEC to prove, in part because the trial was held in Mr. Cuban's hometown of Dallas, where he is well-known and popular, and the SEC's star witness didn't testify in person.

During the process, Mr. Cuban says, he became so frustrated with the SEC's lawyers that he is now considering a new venture publicizing SEC transcripts. "It wouldn't be a big business, but it would be a business because it's not getting done," he says. "I'm going to get as many as I can, and I'll put it out there." His first step, he says, would be publishing trial transcripts on his blog and highlighting tactics he considers suspect. "Sunshine is the best disinfectant," he says with a smile.

Mr. Cuban doesn't give the SEC much credit for its recent victory in a civil case against
Fabrice Tourre
,
a 34-year-old Goldman Sachs analyst, for misleading investors—a case that became a symbol for some of the behavior that caused the financial crisis. The Mavericks owner doesn't see why the SEC would target the youthful Mr. Tourre. "That's the SEC thinking they have a win," he says.

Mr. Cuban says he isn't against the SEC as a whole but thinks that the lawyers who work there should be held responsible for their actions. "There's such a revolving door, and it was run by attorneys with an attorney's mind-set looking for their next job," he says. "It's a résumé builder." Mr. Cuban says individual lawyers aren't held accountable because the public is familiar only with the name of the SEC's chair,
Mary Jo White
.
"No wonder they say or do whatever they damn well please," he says. "I'm like, 'OK, I'm going to start calling them out by name.' "

George Canellos,
co-director of the SEC's enforcement division, sent a response to Mr. Cuban's statements through an SEC spokesperson: "Mr. Cuban's comments are without merit and uncalled for. Our lawyers acted in the finest traditions of government counsel and entirely appropriately in strongly advocating the position of the government in this matter."

Mr. Cuban has never shied from combat. Ever since he bought the Mavericks in 2000 for $285 million, his ownership style has been controversial. He has often fought officials and referees, leading to about $1.5 million in fines over the years. Within his first months as owner of the Mavericks, he says, he was fined $100,000 for conduct unbecoming an NBA owner for watching a game while sitting on the baseline. "You realize back then most owners were old rich guys, and I was 40 years old," he says. "The old rich guys are like, 'What the hell is this guy doing?' "

Under his management, the Mavericks have greatly improved their performance, winning the NBA championship against the Miami Heat in 2011. Mr. Cuban credits his players—particularly "a big German guy," power forward
Dirk Nowitzki
—for the team's success.

Many of Mr. Cuban's other ventures have been entrepreneurial. He first made his fortune founding the software company MicroSolutions and then selling Internet broadcaster Broadcast.com to
Yahoo!
for nearly $6 billion in 1999. Still, he says, "you could have the best year for a typical company, and no one is throwing a parade," he says, as fans did for the Mavericks' championship. "There aren't 400,000-500,000 people jamming the streets." And he finds sports more competitive. "Now there's one winner and 29 losers," he says. "You get do-overs, and you get trades; it's not like you get a whole new season in regular business."

Still, Mr. Cuban's business career has been far more varied than a typical sports season. Born in Pittsburgh, the son of an automobile upholsterer and a homemaker, he started his first business at 12, selling garbage bags to pay for basketball shoes. He enrolled at the University of Pittsburgh and then transferred to Indiana University. In college, he started various businesses, including teaching disco-dancing lessons. "If you get asked by a bunch of sorority girls to come to a sorority house to teach girls how to dance for $25 an hour, you do it," he says. He later tried to bring those skills back as a contestant in 2007 and 2008 on ABC's "Dancing with the Stars."

Mr. Cuban has also invested in media companies such as Magnolia Pictures and Landmark Theaters, but he hasn't always been financially successful in the film world. "The first movie I ever greenlit took me 12 minutes," he says. It was called "Enron: The Smartest Guys in the Room" and got nominated for an Academy Award. "I thought, 'This business is easy,' " he remembers. "It went downhill from there." What worked better was his distribution business with Magnolia Pictures. Mr. Cuban changed the model by premiering movies on television as videos on demand 30 days before they would launch in theaters.

Now Mr. Cuban is back on television. On the ABC reality show "Shark Tank," he and other investors called "sharks" listen to pitches and decide whether to fund companies. He says he likes the show's impact on his three children. "My 10-year-old will say, 'I don't know, Daddy, why would you invest in that?' " he says. All of his children want to be entrepreneurs, he says, and he's tried to impress upon them the difficulty of this route. "They don't want to do the work… but I don't let them take shortcuts," he says.

One initiative that Mr. Cuban says he thinks will help enable entrepreneurship is Obamacare. Though he calls its rollout "horrid," he thinks the law will help small businesses focus on their strengths rather than worry about health care. "As someone who owns chunks of small businesses, the one thing all those companies have in common is [that] buying and providing health care is not a core competency," he says. "It's expensive."

By removing the responsibility to provide coverage from these firms and giving it to the government, he says, "You've freed up money and time." When he started his businesses, he never bought health insurance for himself because he thought it was too expensive and preferred to put his money into his companies. Today, he holds up crooked fingers. "I broke my fingers playing basketball, and my whole body is broken," he says. "If I [had] paid a couple hundred bucks a month, maybe my fingers wouldn't be broken."

Despite his support for President
Obama's
health-care plan, Mr. Cuban doesn't associate himself with either party and considers himself "apolitical." He says he used to be a libertarian but now thinks of himself as an independent. "Libertarians, I think, fail to realize you can't undo" the past, he says. "Now I'm about solving problems." One of his proposed solutions—to the problem of poverty in the U.S.—would be canceling the government's social-welfare programs and giving money directly to the poor. He would also get rid of government-funded pensions. "You can't offer certainty in an uncertain world," he says.

His iconoclastic views extend to foreign affairs too. He commends his former player,
Dennis Rodman,
for going to North Korea, where he met dictator
Kim Jong Un.
"Why can't basketball be like ping pong?" he asks. "I would love to go and would in a heartbeat if invited," he says. "Nothing changes if no one does anything."

Mark is a bit abrasive, but ya gotta love his guts and the results speak for themselves. He plays a bit of a dangerous game by going so public, but the transparency and publicity of it all is a bit of an insurance policy too. But there is a chance that the Feds could make him an example to others like they did with Martha Stewart. They could wait for him to screw up somewhere else like silent wolves in the forest too. They may be hoping that this larger than life personality has a flaw they can exploit.

Obummercare is a lost cause though. I get it that Mark perhaps does not want to offend many players on his team who are Obamaites, but it's a bit much for those of us who must suffer through this ordeal to embrace policies carried out by The Great One.

As for NK, I admire the guy's "can do" energy, but NK is absolutely INSANE and devious beyond belief. I really don't like it when an insane nuclear rogue country and the possibility of WWIII are in the hands of a Rodman or a Mark Cuban.

For an Entrepreneur, Cuban is strangely ignorant of the simple thing a startup can do to handle ALL it's HR, including getting big-company discounts on insurance: use a Professional Employer Organization (Like Administaff or TriNET).Private industry already solved the problem that Obamacare is now making even bigger.

Rodman called Kim Jung Un a "friend for life." How is that even an attempt to change anything? And since then, Kim executed his uncle, who Kim worried was in favor of republicanism, and might be a challenge to his power as a leader.

What Rodman did was make Kim more self-confident of himself. He's considered a pariah amongst decent civilization, for good reason. Rodman took his celebrity and basically said he was a good man.

As for The Affordable [sic] Care [sic] Act, you've got to be kidding.

I think a lot of people who find fame and fortune in one area of life, falsely presume they are wise about all of life. Then they tell everyone their ideas about things they are quite immature about, and end up looking like fools. Hollywood actors and actresses do that often.

He invests in entrepreneurs, he's a big time believer and proponent of paying taxes as the most patriotic thing you can do and now he's giving people a vehicle to put the government in check. These things encompass the spirit of American prosperity.

The government is not almighty and it's practices certainly deserve to be 'checked', so if this new venture puts even a smidgen of pressure on government agencies such as the SEC to do their job more diligently, I'd say it's a step in the right direction.

It always amazes me how hard people are on him as if he should be subject to a more rigid, and infinitely higher standard because he is a (self-made) billionaire. Give the guy a break, he's human and he's sometimes flawed and he may be loud but he's not selling anything and he's not 'going head to head with the SEC'. He's using his size to present some healthy resistance and scrutiny to a body which most of us are too small, and too scared to go up against.

This is government accountability. Power to you brother. There's plenty of us that support you and would love to help however possible to activate this initiative (and hopefully more like it).

The SEC investigations follow the states AG business model of shaking down business for their "cut". It is nothing but extortion, from the most powerful organized crime syndicate in existence, the Government.

"One initiative that Mr. Cuban says he thinks will help enable entrepreneurship is Obamacare."

"By removing the responsibility to provide coverage from these firms and giving it to the government, he says, "You've freed up money and time." "

As they say, "You can't fix stupid."

Anyone would have to tip his hat to Mark for his successes, but that doesn't qualify him as a genius in public policy. Obamacare is the result of big insurance companies and re-insurance (think Buffet) thinking there was a honey pot of uninsured who can be dumped on the tax payers. Business and corporations love the thought of getting insurance off their balance sheets and making it another government deficit. The merging of insurance and the IRS, the two most powerful entities on earth....they will surely run the world together.

He sounded like a intelligent guy until he spoke about Obama Care. If he thinks the SEC is messed up wait until he sees what the government does to health care. As Reagan said " government is not the solution - it is the problem"

Well you do have to admire Cuban's timing in selling Broadcast.com to Yahoo for $5.7billion when the company's stock was dropping and it was only worth a tenth of what Yahoo paid for it. And good for him for having the B@lls to stand up to the SEC. However, I think he needs to rethink his position on Obamacare as he is way off in his understanding of how it's negatively effecting small business.

It is interesting that Mr. Cuban is in favor of government run health care to free up capital, while he opted to not have insurance to put funds elsewhere in his endeavors. Mr. Cuban is astute enough to understand that requiring all to participate costs the entrepreneur upfront capital just like any other tax (right?). Nothing government runs, operates or intrudes upon frees up financial resources of the business. The article would have been sufficient only covering Mr. Cuban's SEC victory.

"Now I'm about solving problems." One of his proposed solutions—to the problem of poverty in the U.S.—would be canceling the government's social-welfare programs and giving money directly to the poor. He would also get rid of government-funded pensions. "You can't offer certainty in an uncertain world," he says.

I think Mr. Cuban and I see the government the same, a bunch of bureaucrats getting wealthy off the system. Until this problem is addressed, everything else has little significance. We are gradually evolving into a class system where employees who work for the government are the privileged class, and the majority who work in the private sector the undesirables, who are exploited by the privileged class to meet their needs.

"Nothing changes if no one does anything" Well I can honestly say that was one of the stupidest statements I ever heard. It amazes me that some very successful people are so shallow as to believe change is always good. The fact is it is mostly not good. People have a basically defined life span and most plan ahead to fulfill their lives. Changing rules in the middle of the game helps a few at a great cost to many. The best thing government can ever do is get smaller and out of business.

Mark, shut up already. If your trial wasn't in Texas (no favoritism there!) and the SEC's star witness wasn't intimidated by you and testified, you would have been found guilty. I used to like you, now you are like a little child who is guilty, got away with it, and has to rub it in because he is all excited. Quit while you are ahead.

Yes, Mark, "you have freed up money and time" for small businesses and at the same time you have destroyed the American healthcare industry and guaranteed that all Americans will now have substandard care. Maybe you should familiarize yourself with the law before you publicly opine on it. Your brand just took a major hit.

I commend Mr Cuban for taking on the government and winning. And i agree that "sunshine is the best disinfectant". But his views on ObamaCare are off. If the SEC can do and say whatever it feels then no citizen can feel good about a government that controls one-sixth of the economy.

I don't think Mark is 100% right all the time (heck, I don't even think I'm 100% right all the time), but he is right more times than he is wrong by a mile. I would be in support of almost any political campaign he leads as his view of what needs to happen in this country is far clearer than anyone actually "leading" it.

what perplexes me is that he fought with the SEC and clearly understands how destructive an unaccountable government agency can be, and yet supports Obama-care. Its amazing that he believes the lies that Obamacare will bring down costs for small businesses. He says he regrets making the decision to put his money back into his business instead of buying health care, but now believes that that freedom of choice should be taken away from others. You need to reconsider this one Mark.

Mr. Cuban is absolutely correct with his analysis of the SEC lawyers...in my opinion, the vast majority of them are only there to build their own resumes and then move to a private firm to attempt to earn really big money. Right and wrong are irrelevant to those SEC litigators.

But, I don't think that Mr. Cuban has really thought through the economic externalities of Rodman's visit to NK, nor Cuban's comment that he's waiting for an invitation to visit that tyrannical murdering dictatorship. Any publicity regarding NK, due to outsiders visiting NK, are bound to adversely impact the majority of the citizens who are starving in NK. Rodman and Cuban should spend their efforts exposing the inhumanity imposed upon the people of NK by its barbarian rulers.

Aww, did I hurt 'um's feelings? You are the most dangerous type of pseudo-intellectual, one who thinks he knows things he knows nothing about. You have no knowledge of the motivations of SEC lawyers and all your degrees won't change the simple fact that you were wrong, made to look the fool by a former government attorney (which, as a class, you obviously despise) as reflected in your final juvenile post. I do not need to tell you about my degrees and training, they are reflected in the way I reduced you to name-calling and personal attacks, just as I expected.

I doubt very much that your "research" qualifies you to make the sweeping, uninformed opinion that you made (there is no such research available that is worth anything; it would be far too subjective). Regarding Madoff, do some research on that one, he not only fooled the regulators but the auditors and others not affiliated with the government so blaming the government for that mess is ridiculous. Your jump from assuming that SEC lawyers are presumed to sacrifice their ethics for the sake of a bigger paycheck down the road to favoring "markets with minimal regulation" is a total non-sequitur.

You have no idea what you are talking about regarding SEC lawyers. I worked for the SEC and I was interested in the letter of law and doing what was right. You are no doubt projecting your own greed onto others. Don't do that, you sound foolish....

Obamacare requires everyone to buy insurance or pay a "tax". That is in affect taking away the freedom to choose. Mark may not have said it, but his support for Obamacare means that he agrees with taking away the freedom of choice. Obamacare, all the efficiency of the BMV, all the compassion of the IRS.

Well, I'll end this conversation by suggesting that you think about the following:Your apparent clerical employment background hardly qualifies you to know anything about the SEC's failure to follow-up on presumed fraud dumped into its lap. Contrary to your perfidious comments, I have three graduate degrees (all from nationally recognized and accredited major U. S. universities-- including a doctorate with exam fields in economics, securities analysis, and business). I have undertaken and reviewed extensive research in the fields. I also have trial testimony as an expert witness and teaching experience in graduate and undergraduate courses in finance and economics for more than 30 years.

So I'll just leave it at that and let you move on to other topics for which you may have a better background to discuss --such as office assistant duties. Happy New Year.

Actually, I have a fair amount of knowledge about the churning cabal of SEC prosecutors. For the most part, my research indicates that many of them attempt, like many other government regulators, to "bully" defendants--in their cases-- into settlements without trials.

Read the research to prevent sounding foolish. By the way, where was the SEC when all of the info regarding B. Mad- Off had been placed in their laps? Oh, that's right, they were too busy screwing the little guys who were easy to intimidate and extorting chicken manure victories from the "little guys" for embellishing their personal CV's to enable them to (hopefully) to move into the big money pits of litigation.

Sorry, but my "greed," as you call it, is limited to wanting free markets with minimal regulation--and then, only regulation that's essential to protecting the public. So, in this case, I'm going to go with the research, my graduate training, and my trial experiences.

My only objections to Cuban were his interest in visiting NK, and supporting the UNaffordable UNcaring Act.

As Victor stated below: " Bureaucracy is the fourth branch of government accountable to nobody."

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